Sewer Issues Make Tax Appeal a Messy Affair!

The New Jersey Tax Court recently tried a dispute between a property owner and a town that began in 2006.  In William G. Orpin, Jr. v. Tp. Of Monroe, plaintiff argued that the Township’s deed restriction requiring the subject property to have a functioning sewer connection, coupled with the Township’s refusal to provide the correct cost estimate of a sewer connection to comply with that very same restriction were impediments to the marketability of the property.  Plaintiff initially appealed to the Middlesex County Board of Taxation but was unable to overcome the presumptive correctness of the County Board judgment before the Tax Court, and thus the County Board judgment was ultimately affirmed.

In 2006, plaintiff sought a residential subdivision from the Township of Monroe (“Township”) to create two single-family residential lots.  Prior to the subdivision, the subject property was approximately 1.79 acres and improved with one house where plaintiff resided.   Plaintiff’s residence, however, was not connected to any sewer line but instead serviced by a septic tank.  In anticipation of the subdivision, plaintiff submitted an initial application for water and sewer connections.  Although plaintiff’s initial application for utilities was denied by the Township, the Township approved the subdivision.  Thereafter, a Township engineer informed plaintiff that a new developer was planning to install a sanitary sewer which would service the subject property but plaintiff would be responsible to reimburse the developer and pay connection fees in the total amount of $115,233.85.  Based on these new cost estimates, the Township requested plaintiff to re-submit another application to reflect these new developments.  The Township’s Planning Board also required plaintiff to include two deed restrictions, one of which required the subject property to have a functioning sewer connection to the Township’s sewer line prior to the issuance of a building permit on the vacant lot.

Sometime in 2007, plaintiff ultimately decided to the sell the vacant lot following the subdivision after he learned that the Township denied his initial application for water and sewer connections back in 2006.  However, after continued efforts, plaintiff stated that he was unable to sell the vacant lot due to the absence of utilities.  Plaintiff did, however, manage to sell his pre-existing house on the adjoining lot, and the new owners were able to obtain a connection to a public sewer line which, by this time, laid in front of the house.  Plaintiff re-listed the vacant lot on the market in 2012, and he had come across a potential buyer .  However, the buyer’s attorney was “advised [by the Township] that it will cost between $90,000 to $125,000 to connect to water and sewer.”  The buyer’s attorney also informed plaintiff that according to the Township, plaintiff had an “escrow deficit of $1,272.”  Plaintiff tried to assure the potential buyer that the buyer should deposit $35,000 towards the cost of water/sewer costs but the buyer ultimately walked away from the transaction due to the discrepancy between the plaintiff and the Township in estimating the water & sewer connection costs.

In 2014, plaintiff made an Open Public Records Act request to the Township regarding the subject property.  The Township responded by providing a bill to plaintiff of a “past due project account” in the amount of $1,237.07.  Similar to an attorney’s billing statement, entries were shown in connection with plaintiff’s 2006 water and sewer applications that were billed hourly.  The Township informed plaintiff that the “2006 reimbursements were no longer active” and thus the Township would not provide plaintiff “new cost estimates” [for the water and sewer connection] unless plaintiff paid off the outstanding charges from 2006 in the amount $1,237.07 plus another $250.

At trial, the Township made an oral motion to dismiss plaintiff’s complaint for failure to pay taxes and municipal charges pursuant to N.J.S.A. 54:3-27.  The Township argued that the outstanding balance of $1,237 qualifies as “municipal charges.”  The court, however, distinguished N.J.S.A. 54:3-27 as it applies only to complaints filed directly with the Tax Court.  In the case of an appeal filed to the Tax Court from a County Board judgment, as in here, the applicable statute would be N.J.S.A. 54:51A-1(b) which requires “all taxes or any installments thereof” outstanding for the year under appeal to be paid at the time the complaint is filed.  The applicable statute does not require the payment of all municipal charges.  Although the court did not decide on whether the outstanding charges would qualify as municipal charges, the court reserved doubt “since the charges for which a lien can be filed applies to amounts due after a water/sewer connection is provided.”

The court then addressed the crux of the matter, namely, plaintiff’s claim that the deed restriction requiring a sewer connection adversely impacted the property’s value, and that the Township’s “extortionist” behavior of refusing to provide the right cost estimates of the water and sewer connections impedes further on the marketability of the property.  The court, however, was not convinced that the deed restriction on the subject property adversely affected its marketability due to the fact that as of the valuation date (October 1, 2013), there was a sewer facility available for connection to the subject property.  Most importantly, the court stated that even if the Township’s refusal to provide information regarding the connection costs was improper, plaintiff failed to carry the burden of proving the subject’s true value.  Plaintiff’s methodology of concluding the fair market value of the property was flawed.  For instance, plaintiff vehemently disputed the Township’s estimated connection costs and yet at the same time used that very same figure to offset what he thought the subject value should be.  In addition, he failed to provide any comparable vacant land sales in 2013 because he was unaware that the valuation date was October 1, 2013.

 The Tax Court indicated that there was no statutory or other legal authority that permitted the Township from withholding the cost estimates from the plaintiff unless plaintiff paid the outstanding balance plus another $250.  It remains to be seen whether plaintiff will be able to successfully obtain connection costs from the Township and build an improvement on the vacant lot without giving in to the Township’s demands.

A copy of the Tax Court’s opinion is available here.